Basis Point (bps)

A basis point is one one-hundredth of a percentage point (0.01%), used throughout finance to describe small changes in interest rates, yields, and fees without the ambiguity that can come from saying "percent of a percent." 100 basis points equal 1 percentage point.

The unit matters because financial changes are often small in absolute terms but large in relative impact: a fund with a 0.75% expense ratio (75 basis points) charges 25 times more than a fund with a 0.03% expense ratio (3 basis points), a difference easy to understate if described loosely.